Bonus buck stops with Brown

When Gordon Brown entered Parliament more than 25 years ago, did he ever in his wildest dreams believe he would have to decide on the bonuses of 177,000 bankers?

Because that's what the prime minister - in partnership with the Chancellor, Alistair Darling - will have to do in the next few weeks.

How so?

Well, Royal Bank of Scotland, owner of NatWest, has to announce in March what bonuses it will be paying its 177,000 employees in respect of their performance for 2008.

And although the government has said that it wants RBS to operate in a commercial fashion, the rescue of the bank last autumn means that it is 70% owned by the state, by taxpayers, by us.

Which means that - whether he likes it or not - the buck for any of RBS's actions stops with the prime minister, with Gordon Brown.

And decisions don't come any more fraught than whether RBS should pay bonuses.

For the avoidance of doubt, although the Royal Bank board will take a view about how much bonus to pay, it will look to Darling and to Brown for their approval.

"But surely," you may say, "this is a no-brainer: RBS shouldn't pay a penny of bonus."

Just last month, Royal Bank announced that it made a record-breaking, eye-watering loss of up to £8bn in 2008 and its share price plunged. In those dire circumstances, how could it pay a bean of bonus to any of its bankers?

Well, Royal Bank's board believes it would be mad, bad and dangerous to pay no bonuses at all.

Here's why.

That colossal loss of up to £8bn stemmed from the crazy lending and investment decisions of perhaps 500 people - many of whom have either left the group or won't be paid a penny of bonus.

That leaves more than 176,000 staff across the world who've worked hard and generated valuable profits.

They feel they've earned a bonus, because they identify with their own bits of the bank, not the entire gargantuan sprawling entity.

What's more, even in this time of nasty recession in the financial services industry, the best of RBS's staff could still move elsewhere.

So the fear of the bank's board is that if it were to pay no bonuses, tens of thousands of its employees would be demotivated and all its best bankers would quit to go to rivals.

You may shout "who cares?" - and you may argue that the Royal Bank would be better off without the clever-clogs who didn't prevent the stupid loans and investments in the first place.

But we shouldn't forget that RBS is a complicated global business with more than £2000bn of assets.

And if the staff were staffed only by dunderheads and mediocrities - well, the bank could spiral into disastrous, irreversible decline.

Which would be a big and expensive headache for all of us, since - to repeat - we own 70% of the group.

It would be in our interest, presumably, to sell our 70% stake back to the private sector for a profit one day - and that would be impossible unless RBS were perceived to be a commercial success.

So RBS's board believes it still has to pay bonuses. Although it acknowledges that bonuses have to be slashed, probably by more than 50% on average.

Also, it concedes that it can't pay much in the way of cash bonuses. The rewards would therefore be in the form of bits of paper, funny money, proxies for shares - which promise a return in years to come.

But there would nonetheless be a valuable bonus - perhaps equivalent to 10% of salary for branch staff and many times that for the top advisers and traders.

And even with a 50% cut in the overall value of bonuses, the aggregate cost of bonuses would be several hundred million pounds, possibly not far off £1bn (this is my estimate).

So will Gordon Brown wish to be seen to be sanctioning bonuses running to several hundred million pounds at a bank taken to the brink of collapse by its crazy loans and investments?

It's the kind of dilemma that would make even the toughest prime minister weep.

Comment number 1.

If this money is actually available to pay as bonuses then lets have it made available as venture capital to fund and drive forward new manufacturing based companies preferably in the clean energy sector.

Comment number 2.

Surely this contradicts your previous post - there were no profits, as the transactions from previous years (on which bonuses were paid) have crystallised into huge losses. It is almost fraud to claim a bonus on 'profits' which were based on toxic loans and bad paper. And where are all these financial 'geniuses' going to get other jobs?Ah yes, a friend is looking for someone to valet cars...and there is a bonus.

Comment number 3.

On a performance basis then RBS went from a proft to a loss.If a bonus is paid on a loss, then surely a profit is worth more than the 50% premium of previous years. This therefore implies that the value of their bonuses in previous (profitable) years was undervalued and underpaid.Lots of law suites all round as the seek fair remuneration.

Unless, of course, that the value of a loss is not 50% of the value of a profit, which in all honesty Robert, I think is the point.

No profit, no bonus. Saying that only 500 out of 177,000 caused the losses does not excuse the fact that collectively they are a 'company' which the dictionary defines basically as 'A group of persons'.

United we stand divided we fall !

One final point, loss of 'good' staff without bonuses. Well if that is the price, let them go, they didn't exactly do that much 'good' to assist the bank remain a.) profitable, and b.) in private not public hands.

Comment number 5.

Maybe those really clever people who think that they deserve a bonus when their employer has bust the world might move on to do something productive for the world, instead of shuffling other peoples money around.

Comment number 6.

I don't have a problem with anyone under the grade of Branch Manager getting a bonus, anyone else can swing for it, but I suspect that your piece is to soften us up for the announcement that they will come down really really tough , but they need to retain the chairmen et al so they will give them shares and cash , personally I would send them to jail, and that is not being over dramatic, they cheated, stole and lied, If I did that I would be in jail, throw them in an example needs to be made, it is Gordon's only chance of getting a vote from anyone in the next election.

Comment number 8.

RBS need to get real. No significant bonuses for anyone can be justified by a company making losses of £billions. I have friends whose whole savings have been wiped out by the losses at RBS & HBOS not to mentioned the millions whose pensions have shrunk because of the Banking crisis. They will be furious if they then see RBS or Lloyds paying significant bonuses

They are not going to lose staff as no one is hiring. As Michael Portillo said on TV tonight remuneration committees have been deluding themselves for years with their justifications for the rewards paid.

The one exception I would make to this are junior staff whose pay structures are geered to there individual performance and where it can be demonstrated that there was no overall increase in the overall remuneration package when this was introduced. i.e. the better workers get more than the less effective.

Comment number 9.

'more than 176,000 staff across the world who've worked hard and generated valuable profits.They feel they've earned a bonus, because they identify with their own bits of the bank, not the entire gargantuan sprawling entity'.

What about the millions who have worked hard for an entire lifetime only to find their expected ‘bonus’ of a pension or interest from their savings no longer exist? Sorry, but hard working bank staff are NOT a special case. They must suffer their share of the pain just like the rest of us.

'What's more, even in this time of nasty recession in the financial services industry, the best of RBS's staff could still move elsewhere'.

Really? Where to? The rest of the world is suffering slow financial strangulation and suddenly there are lots of vacancies in the banking industry? Something doesn’t add up.

'And if the staff were staffed only by dunderheads and mediocrities, well the bank could spiral into disastrous, irreversible decline'.

There’s a very strong argument that says that has already happened.

'Well Royal Bank's board believes it would be mad, bad and dangerous to pay no bonuses at all'.

If that is true then it is a vivid illustration of how little grasp or understanding they have of the public’s perception of the banking industry at this time. It is bordering on outrageous that the case FOR giving bonuses is even being considered.

Comment number 11.

RBS needs the best people. Well, the best people have so far made a huge mess of things - true not all - but why pay bonuses for simply doing the job you are paid for. The are thousands of similarly qualified 'best people' who are currently on the dole queue. That means there is absolutely no way the 'market price' for jobs requires any bonus - there are lots of unemployed bankers who would give their eye teeth for a job AT ANY PRICE. This is Broon once again using Pesto and this blog as a sounding board - and no you won't get away with paying the bonuses.

Comment number 12.

Many in Britain are losing their jobs, many are are on short time working, pensioners are suffering in the cold and have had their savings demolished. I'm sorry for those in the banks who think they are due a bonus, but...

come and join the real world like the majority of Britain at the moment. Be glad to have job and certainly don't expect a bonus. Yes, you think you deserve it, yes you've worked hard, so have we, we think we deserve more too but you cannot expect us to bail you out then give you a bonus on top. It would be absurd if anyone in the banking industry received a bonus for 2008, absolutely absurd. Get real!

and.. Government, if you pay one you will incite the masses even further.

What should have happened here was the banks should have gone to the wall and we could have all got through this a lot quicker (but we were not consulted). This will be very painful, very contracted but in the end the same result: A total collapse of the present banking system and our present Government!

Gobsmacked that we are debating bonuses for failed banks. Is it me, is this saga becoming so ludicrous that you couldn't make it up?????????

Comment number 15.

Isn't it time Gordon and TB (now a banker) were called to account for the deliberate castrating of the regulator:-

Just one of many stories:-

Tuesday, 26 February, 2002, 08:49 GMT A scandal waiting to happen?https://news.bbc.co.uk/1/hi/business/1840004.stmLast month, Sir Howard Davies, chairman of UK regulator the Financial Services Authority, warned about the perils of dealing with these types of instruments.During a speech on insurance regulation, Sir Howard remarked: "One investment banker recently described synthetic CDOs to me as 'the most toxic element of the financial markets today'. "When an investment banker talks of toxicity, a regulator is bound to take a heightened interest."

Comment number 16.

"What's more, even in this time of nasty recession in the financial services industry, the best of RBS's staff could still move elsewhere."

Please consider here the wider workings of any market - and the way the action of one player can affect the others, especially in a declining 'industry'.

If RBS (and Lloyds etc) slash bonuses almost to extinction, then OK maybe some tens (or hundreds?) of personnel will leave to go elsewhere. But the point is that by RBS doing this, all the other banks actually have a chance to reduce their bonus payments too, to ALL their employees (maybe thousands, or tens/hundreds of thousands?) and still retain them, 'cos the market rate has suddenly gone down, and these people ain't got many other options out there.

I'm sorry, but as an employer responsible to your shareholders, just as you've been claiming to pay the market rate on the way up you should be doing it on the way down as well.

Flexibility of labour markets!

Isn't that what we need right now, to help revive the banking industry?

If bonuses are heavily slashed in RBS and Lloyds Banking Group etc etc, it will in fact put significant pressure on all the other banks to control their own bonus payments

Comment number 17.

This will be a true test of the man's continuing honesty. Will he remain consistent to his previous actions and do what he really believes to be right? And will waht he believes to be right chime with the electorate?

There's a very strong argument for him to put his foot down and stamp all the bonuses out. The popularity benefits among middle England voters would be huge and he would be seen again to be a man of action rather than words, someone to get you through a crisis. It would also chime with the unions and with the impending nationalist/jobs for Brits minority views. Bankers wouldn't like it but they're not core voters in the marginal seats.

He might not stamp on it, but then it can't make his position any worse if he doesn't and he might think that a strong fist is too risky. After all, Maggie couldn't get rid of the Iron Lady. Gordon, the Iron Man?

Comment number 18.

Mass redundancies, repossessions, bankruptcies, homelessness, yet the Bankers still win through receiving tax payers money, OUR MONNEY !!!!! Our hard earned taxes have gone on what exactly ? What have we got out of it ? After all this they have the audacity to say we will have to raise taxes in the future. How can we rely or even respect the state, whilst its hell bent on rewarding the banking billionaires through forcing us, its citizenry into abject poverty, both now and in the future ?

Comment number 19.

Without support from the government ( taxpayers ) this organisation would have gone to the wall and the employees wouldn't have a job , let alone receive a bonus . So no I don't think they should get one , the bonus greed culture seems to be part of the reason why we are in this state today . I don't think it is much of a valid argument to say that they will be able to get better jobs elsewhere with the state things are in , the bluff should be called . I'm sure there are hard working people in the bank , but I am also sure that there were hard working people in Woolworths , Ford , Zavi etc . The government couldn't let the banking system fail but it sure can refuse to give bonuses to members of an organisation which would have gone belly up without the support of taxpayers . There seems to be too many state controlled banks now , can't the government utilise the economies of scale and put Northern Rock , Bradford and Bingley , Rbs et al into one organisation , its what would have happened if all these were taken over commercially .

Comment number 20.

Comment number 21.

So we need to pay bonuses to keep the staff...despite the fact there's no one in the industry with any hiring budget. Bonuses are surely linked to performance targets of the bank as a whole. Just let them live without for now.

Comment number 23.

This lot need to find their dignity and self respect asap, seriously! All kind and sharing, worry about the tellers? There is a first!

Everyone knows the banks have made massive losses.

No matter what company you work for, you only ever stand a chance of a bonus, which is after all an additional payment to your salary and not something you have an absolute right to, if that company as a whole performs really well and so do you.

There could be an argument for bonuses to be restricted to particular, highly successful departments.

In this case, the bank is in serious trouble. Surely the staff at all levels are lucky to have a job and a salary at all.

What is going on here? Were all staff members banking on bonus payments in order to meet mortgage payments?

There are a very high percentage of people who have posted in this blog to vent their anger at the bonus culture, the sick bonus culture.

They are not angry with the little clutch of directors. They are angry with every one of the traders, the gamblers who destroyed RBS and the other financial institutions and have destroyed the economic security of all of us. That also includes the people who made the decisions, the so-called experts who came up with these fruitcake schemes, those around them who managed to convince everyone they were dead certs.

They are also angry at those working inside the bank, the regulators etc who knew this was a big game, a very big dangerous game, yet they sat back and did not attempt to put a stop to it.

If anyone needs a bonus to keep them going to their work, to give them that warm glow, then how about those who provide care to the elderly, the school teachers, our police officers, the lollipop people and the many thousands of other people who never see a bonus?

The sooner everyone gets used to the idea of a fair wage for a fair days work, no more, no less, the sooner we might begin to move on, and work towards sorting this mess out.

When are they going to give up trying to sell this idea to the public, the shareholders and the customers. It will not wash. If they keep it up, they are going to look like beggers - and none of them are!

There is no moral dilemma. This is a joke, right?

Now, I need a cup of tea to recover from yet another Victor Meldrew moment.

Comment number 24.

Given that its way too complicated 'intelligence' and 'innovation' in financial services that has got us into this mess, isn't the whole point of the required transformation of the banking sector that we should be championing the rise of the 'mediocrities and dunderheads' to the very top of the profession ?

Comment number 25.

If any other company had done such a good job it went bust and got nationalised then there wouldn't be the slightest question of any sort of productivity bonus for anyone. Why should it be any different because it's a bank?

Perhaps this would also make all the board, the managers and the decision makers realise that they allowed 500 people to bring a 177,000 person, multi billion pound company to the brink of collapse and maybe, just maybe, they will realise how totally irresponsible they have been. If they finally realise this perhaps those who have any sort of conscience or integriity will finally resign. Unlikely I know, but it could happen.

Comment number 28.

And everybody has been saying how the banking sector is about to change for ever

This is clear evidence how wrong that is. If a penny of bonus is paid to an RBS employees, this is very wrong. Any other business would have to scale down in lean times - lose valuable staff / 4 day week / scale down premises etc

Comment number 29.

Bonuses should be based on criteria that are seen as logical and fair. It is not logical to award bonuses in any company unless the group as a whole is profitable. It is not fair to treat bank employees more favourably than staff working in other sectors.

Comment number 30.

I wouldn’t pay a collective bonus of even the princely sum of 22p (the current share price of RBS) to these people for three reasons.

Firstly, how could I run a company that with one hand gets rid of 3000 jobs (they can’t all have been the most to blame for this mess -https://news.bbc.co.uk/1/hi/business/7728596.stm ) and then with the other hand, distributes bonuses to the other employees? Why not save the jobs (income tax would prove handy for the government at this current time) and hold off on the bonuses.

Secondly, and this point has been made several times already. A bonus is non-compulsory and should not be received as of right in the same way as a salary. Ah but then the old argument appear that you need bonuses to motivate people to do their job to the best of their ability! Well even that argument is taken and you ignore the possibility that people in banks might be motivated by professional pride, providing a service for others, or the intellectual and physical challenges of the work, there is still a problem. If the rule was that you got paid a salary and if you do your job better you get a bigger salary and so forth this would mean that you can still be encouraged to work harder through a motivation of money. For instance, a doctor knows that if s/he does their job to the best of their ability, the salary will increase. So it is not irrational for a banker who is motivated by money to want to continue to do the job to the best of their ability even without a bonus as it is clear that a higher salary awaits those do the best.

Finally, I would not be bullied into paying bonuses in response to the threat that if you do not then bankers will walk out of their jobs in their hundreds/thousands. Well that may have been a credible thought about a year or so ago but now anyone working in financial institutions like RBS should consider themselves lucky to have a job and I really doubt that upon receiving no bonus they would suddenly put their signatures where their mouth is and walk out of an extremely well-paid job (excluding bonuses) and take their chances of finding another job. It is time to call the bluff of these people. Personally, I would be very interested to see the amount of RBS staff who voluntarily resign from their jobs in March in protest at not receiving a bonus. It will probably not be as many as the number of RBS staff who have been told to leave their jobs in the last few months.

And finally some political advice to Gordon Brown – this furore surrounding bonuses is very much your natural territory – state intervention, social justice, and fiscal responsibility, et al. As a result, people are looking for a lead from you (and expect it) more so than they would from other politicians. Right now, there is not an ounce of sympathy for the financial institutions (and those that work for them in their company headquarters) who whilst not solely, are clearly considerably, to blame for this entire mess, but there is a consensus that the collapse of the banks would be devastating to the British economy. And so, people have just about accepted that taxpayers’ money is needed to recapitalise the banks but that does not mean they are going to in any way except the excesses of these bonuses because although the City might have grown accustomed to them, they are still an anathema to 95% of voters. They will not understand the argument that a bonus is necessary to keep RBS commercially viable and prevent it from keeping up with its global competitors. You need proof of this - watch any episode of Questiontime or any other political show which involves normal members of the public in the audience when this issue comes up. This is a massive political opportunity for Gordon Brown and one where he can not only copy Obama ( https://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/02/obama_biffs_bonuses.html ) but go even further by imposing a lower ceiling of bonuses.

Comment number 33.

Having read the first 30 comments I think that Gordon Brown's popularity will drop further if he pays any bonus to banking staff.

Your argument is well put but it doesn't seem to find much favour amongst us readers. I detect little or no sympathy here. I predict that the vast majority of the following comments will continue to be against the payment of bonuses. If GB is using you to sound out the public on bonus payments then I think the answer is going to be no, none. Sorry.

Comment number 34.

Dear RobertLets just say that EVERY BANKER should not recieve a Bonus for the failure of the Banking system and because of the Havoc they have created.The fact is they do not deserve a Bonus, they have not only created this mess, they are also guilty of MISS selling, that has ripped many peole off just to make a fast buck, Then there is out and out farud, and there are those who had no intention of paying back money invested, and many have not yet beeen caught,How ever the greatest failure here is the authorities, who have failed to ACT, therefore the Bonus;'s have been paid, regardless due to the fact the damned Industry, has been ripping people off for decades, ever since dereulation and Capitalism.THEY SHOULD BE MADE TO RETURN EVERY PENNY.

Comment number 35.

I believe myself to be one of the biggest critics on the whole issue of how GB has handled the economy and the way in which the banks were allowed to act without proper restraint.

That said - I agree that the money invested in RBS MUST produce a decent return, in which case it is of paramount importance that the intelligent bankers remain.

As a shareholder I want to see a change in the senior positions, those who had the power to act but didn't.

As a shareholder I want more transarency in its business operations and long term plans.

As a shareholder I want to see good investment in good people.

If that means offering bonuses - then I as a shareholder am happy for that to happen.

What I DO NOT WANT is - as a shareholder to see those in senior positions who made those dreadful decisions, or were aware of those decisions being made but did nothing there next week.

I also want to see those bonuses that were paid out in advance repaid in full.

GB should have put that stipualtion on the money BEFORE it was given. It took them a few weeks to put together a rescue package, the fact that this government did not even consider it is criminal incompetence.

Comment number 36.

On top of bankers Bonus's that should not be paid, and Gordon Brown should have stopped this ages ago, when the tax payer bailed the banks out, there is another point regards Bonus;s, it is a Huge Bonus for a Company to write off Billions in Debt, to avoid tax., ITV has just posted a £6, Billion loss I wonder what the Bonus is here it would be interesting to see the the last five years operating figure would it not.Executice are being paid on the back of tax write off's, and its public money ???

Comment number 38.

Of course we should pay the bankers bonuses. They should be rewarded in shares at historic valuations and only triggered when the current share value goes above that of 3 years ago. The bonuses given in the intervening years should be deducted from the bonus amount. In effect they should be penalised for the drop in share values due to their previously unrecognised poor performance.

Comment number 39.

well im sure the bankers are scared stiff of brown ha ha,i mean hes the thing that helped get them huge bonuses in the first place.not only should the bankers, who have fleeced the people of the uk should be prosecuted, but clarkeson should be made pm, he make a darn sight better job.

Comment number 40.

I believe that people tend to forget the global scale of this company. As Robert points out in his article, the Royal Bank of Scotland is worth approximately £2000 billion in terms of assets. Much hype has been centred at the group's loss announcement, whilst significant, is only in relation to the global economic downfall. The bigger you are, the harder you fall.

The staff have made the group the largest capital assets financial group in the world. Ultimately, the ill-decision of a few has taken the bank into position it is in but lest we forget, it could have been much, much worse. The group appears to have done everything in its power to change this regime, however the staff who generated amazing results last year remain and continue to over-perform. This comes at a price. That price is a bonus for happy, profit-generating staff. After all, this is exactly what the country needs, a global financial institution that generates profits. The world will be a better place.

Comment number 41.

Bankers got large bonuses for large profits why should they be rewarded for huge losses. Maybe branch staff who have to face the cheesed off public should get some reward and perhaps local branch management. Beyond that more senior management and especially those responsible for granting these disastrous loans should be penalised with negative bonuses - a bonus scheme should work both ways

Comment number 42.

A few key questions about bank bonuses need to be addressed by those shouting for no bonuses under any circumstances:

1. Suppose a trader in a profitable bank makes a net profit for the bank of $50m using his own trading skills and the bank's capital and systems. How much of that $50m should be given to the trader as remuneration and how much should be retained by the shareholders?

2. Is the answer in question 1 different if the bank's other activities, completely unconnected to the trader, make a net loss of $500m?

3, Would it make a difference if the trader began his year on a hypothetical salary of, say, $1m pa but was only paid monthly cash amounts at the rate of $100,000 pa, with the balance of $0.9m only being paid if profit targets are met? In this way the trader would effectively share the pain if profit targets are missed.

4. Are the answers to 1 - 3 different in the context of a banker earning for his bank a deal-related fee of 0.5% x $10 billion or should all such work be charged to the client at an hourly rate?

5. Under Obama's proposal to cap "executive" pay, who is an executive? Is it senior management or does it include all staff?

6. Is it morally wrong to provide incentives to staff (eg at Northern Rock) for achieving specific targets? Does this morality metamorphose into acceptability when applied, say, to sportsmen for winning a competition or gaining promotion?

7. Who should determine the level at which a proportion of salary deferred and paid once per year changes to become an unacceptable bonus? This type of approach is common for back office staff at banks but is it morally acceptable?

Comment number 44.

Dear Robert***** 38***NOW THERE'S ATHOUGHT, THE serious fraud squad, ----- are they invisible they may as well be, in their usual place head buried in the sand frightened stupid of rocking the boat, another quango that is pretty well useless.Come on Robert ask where their hidingin all this.???

Comment number 45.

(Good to see you and the other journalists survived the Government witchhunt - shame the Government is not so keen to be as 'energetic' in chasing the 'real culprits' of the 'credit crunch'. Good show.)

Now, how and more importantly, why do you pay bonuses to Bankers when the organisation reports such a loss? What happened to the 'tax rules'? If there isn't money in the kitty, how do you pay the bill?

Or are you really telling us that RBS has cooked the books, used creative accounting to show losses bigger than it really has?

If RBS was split up into its UK and overseas component parts and accounts were prepared for each, seperately, what would each 'part' show in the way of profit or loss?

If a part of the bank showed a profit, then that profit should be paid to the employees of that part.

If part showed a loss, then the pay of the employees in that part of the Bank should receive a pay cut and the 'head' should 'walk the plank'.

It really is academic anyway.

RBS will do what it wants. The Government has no legal veto and the public will, no matter what, vote Gordon Brown out of office at the next election.

Why waste this blog on concern for the (former) Prime Minister?

Surely that is the price you pay when accepting the "terms and conditions of employment"?

Succeed and be rewarded, fail and fall on your sword.

Waste this blog space no more Robert.

Do better things with your talent. Go after the 'bad boys'.

The Prime Minister may have lost one eye through tragic accident, but fair play to the man, it has never let it stop him succeeding in becoming PM or keeping himself well informed and read.

Why doesn't someone go after the incomprehensibly, incompetently blind regulators, civil servants, trade ministers and treasury officials who have shown such crass ineptitude in failing to see or spot the problems arising both in the Banks and with later admissions, the Economy.

Didn't shares in Wilkinson Sword and Gillette rise in the last (French) Revolution?

Comment number 46.

There should be no bonuses before all rescue capital is repaid. If they want to pay bonuses, they should return taxpayers' money. Then they can pay out to their hearts' content again.

It is doubtful bank staff are capable of any gesture in protest. The RBS/NatWest staff I see on a regular basis are a spent force, no longer capable of looking customers in the eye. They are clinging on, not moving anywhere.

Comment number 47.

Gordon Brown should follow Obama and put a cap on pay accross the banking world. This will prevent employees jumping ship to a competitor. Employees will not go to the US if the cap is the same. The EU should also follow this policy.

Some say why don't the shareholders complain more about the bonus structure....The share holders are mostly pension funds controlled by bonus paid bankers....There is an obvious conflict of intrests.

Comment number 50.

I dont accept the arguement of paying bonus to the staff of a Company that makes a loss. It doesnt matter if was 500 or 5000 people who may have been responsible for the downfall of RBS, they are still working for an enterprise that didnt make a profit.

The employees of RBS should be thankful they are still employed- if it wasnt for taxpayers like me, through the Government, who bailed RBS out - some 3-4 hours before the Bank was about to go bust- they would be now sitting at home, with no wage income, watching their savings diminish due to the financial impropriety of some of their fellow employees.

Comment number 51.

We, the taxpayer, have already provided a bonus to the people in the banking industry. It cost us many billions of pounds. It has provided continuing employment for bankers when many others in the wider economy have been forced on to the dole queue.The bank staff at all levels have had their bonus, they do not deserve another.

Comment number 52.

on 2nd thoughts lets hope the bankers get paid huge bonuses,it will mean the end of brown, so its a blessing in disguise, also ,is this a record, for various amounts of money from 4000 to 300 in lloyds tsb internet account i got,wait for it,0.11p interest from 5 jan to 5 feb!!wow "what shall i spend the 0.11p on "brown?

Comment number 53.

So, when will we see the Lloyds bonus announcements, for their HBOS staff? I met some of their corporate sales people recently and was overwhelmed by their arrogance. These guys were on bonuses of several hundred thousand in '08. They are not 'senior bank executives', just senior sale managers. I have a massive amount of empathy for the branch, back-office and support teams who's roles are under threat right now and who's savings have been wiped out by the fall in share prices...but these guys are the ones who have contributed to bringing their bank to its knees. Quite honestly, why are they even still there when most other firms have already made massive cuts to their workforce??? Are Lloyds THAT much more profitable as an organisation than their entire peer group? I guess their February results will give an answer to that question...

Comment number 57.

"RBS has £2,000 Bn assets"Yes, but it probably has £2,001Bn liabilities and that is before more and more right offs of bad debts to come over the next few months.Surely bonuses should only be paid out of net profits and there aren't any of those at the moment and in the near future.Where are all these banking jobs these RBS employees are going to run to because they don't get a bonus.It seems to me that all the banks are srill not disclosing their true losses/bad debts and the banks will be Nationalised in the UK.

Comment number 59.

I'd point out that some other institutions much villified by the tabloids including certain asset managers such as hedge funds live and die in Darwinian style. No profits = no performance fees = no bonus. I make no comment about any particular fund/ethics etc as this is not the debate. What seems incomprehensible is the ability of institutions to award large bonuses at times when the losses are so eye-wateringly large. It is a Principle-Agent problem at its very worst. By all means certain institutions need to have basic pay to attract the right people - but how on earth can you pay large bonuses in organisations that have proved themselves to be a monumental failure - with taxpayers money! I don't recall any big mutual funds or hedge funds asking for government bailout money! But it seems that certain hopelessly managed industries are not only asking for my money to plug what is essentially unpluggable holes in their balance sheet, but also is using the capital to pay employees, ensure pension plans are topped up etc. It is outrageous and I direct my anger at the banks and governments that are flushing my money down the toilet!! PS I don't work for or manage money for hedge funds before you ask!!

Comment number 61.

#48 well what a shame, i like to know what your basic pay is?...why do we need bankers anyway? what do they actually do? get them working for 150 quid a week on the olympic site in stratford, it would be more usefull.

Comment number 62.

When I worked in Corporate Finance in the 80s, bonuses were introduced at my company. The bonuses recognised two things:

1) That in order to attract people of the right calibre it was necessary to pay them over the odds - there was a shortage of people with the right skills and experience in my field and the market was dictating higher pay. 2) That such a market distorted the company pay structure in such a way that I would have been earning more than my line managers, who had responsibility for what went on in finance but no skills in dealing in either foreign exchange or the money markets.

The bonuses were not recompense for a job well done, they were a reflection of a skills shortage which created internal distortions in company pay. I always assumed that should the skills shortage dematerialise, the company would waive bonus payments accordingly.

What seems to have happened since then is that everyone has come to expect bonuses as a matter of course - neither for a job well done, nor to allow for internal distortions of the company pay structure.

It is therefore unlikely that those who are part of the finance industry will waive their bonuses, either temporarily or permanently. That would be like expecting turkeys to vote for Christmas. The move to curb bonuses hard needs to come firmly from the outside.

With the benefit of hindsight, the banking industry across the board has done a poor job for several years now; and it's now a buyer's market for people with "skills" in finance. On both bases there is no reason to reward bankers with bonuses.

Gordon Brown represents the UK taxpayer in these matters. We expect a strong lead.

Comment number 66.

Tier 1 is your HSBC, Standard Chartered, Santander - banks which although feeling the squeeze are well run with good diversification and risk management.

Tier 3 is your Northern Rock, RBS, Lloyds (why did they ever buy HBOS - that catipulted them from Tier 1 to 3 overnight). Government owned, and going to cause a stink if they pay bonuses.

Tier 2 is your Barclays. Is trying to position itself as a Tier 1 (and is producing profit) but no one quite believes them (they seem to be considered by the market to be guilty by association rather than anything based on fact).

In my mind bonuses to Tier 1 is fine. Bonus to Tier 3 where we are in effect paying the bonus is outrageous.

Robert - you do make one faus pas though - you link bonuses to shareprice rather than profit. Profit they can control, shareprice in the short to medium term is harder to control (market sentiment etc). So take Barclays - they are supposedly about to announce mega profits, haven't taken tax payer money - why should they not pay bonuses?

Comment number 68.

Surely there is an alternative way which might suit both sides of the argument. If salaries continue to be treated in the normal way within the PAYE system but bonuses are treated as capital gains, then the Treasury should be able to devise a suitable level of taxation to claw a lot of it back. The bankers get their just deserts - a decent bonus much of which evaporates before their very eyes. Poetic justice.

Comment number 69.

Perhaps any bonus offered should include a portion of that toxic debt!

Bonuses should not be paid as the company cannot afford to pay it. A bonus is not a right it is something paid in addition when the business is successful (really successful not just magically on paper!)

Comment number 70.

I don't see how any organization which has just posted an £8 billion loss can justify any kind of bonus.

This bonus culture in the banking industry is crazy and doesn't seem to exist anywhere else. The whole idea of "bonus" is a reward for exceptional performance either on a personal level or as an organization as a whole. These bankers seem to think it`s their god given right come hell or high water. A bonus - like respect - is earned and I fail to see that it has been earned within RBS. If Brown and Darling had left the future of RBS to be decided by the markets and the system it wouldn't even be in business today and would have gone the way of Lehmans. And for this we as the taxpayer are expected to reward this massive failure!!!

The bonus for half of these guys should be that they are still in a job while millions of other people find themselves out of work and struggling.

Comment number 72.

You are looking for definitions and set criteria when it comes to executives (question 5), staff incentives (question 6), and proportions of salary that can be deferred (question 7), but are pretty inflexible in your example of trader who makes a “net profit for the bank of $50m” (question 1). How are you going to measure that profit? Each year / month?

What happens if that $50m “profit” is actually a product of serious risk-taking using complex financial models which most people (dare I say perhaps even the trader) do not understand in their entirety? And then maybe a few years down the line, after this trader has collected several years’ worth of bonuses for their sterling work, the bank which s/he works for suddenly becomes unprofitable because of over-exposure and risky investments. It might even perversely be the case that the trader who made a net loss of $500m (question 2) did less damage to the bank in the long-term. And why might all this happen? One possible suggestion could be that the bonus system actually distorts employee behaviour and encourages bonus-seeking bankers to take short-term risks, often ignoring regulatory obligations, so as to make profits in the short-term. In the end perhaps, the answer to your question 3 might be that yes it does make a huge difference if a trader’s salary is 90% dependent on profit targets since that could encourage risk-taking in the short-term and affect the profitability of the bank (not to mention shareholders, investors, other employees, and the rest of the UK economy) in the long-term.

Comment number 73.

The difficulties of RBS etc. did not just affect the 177,000 employees of RBS, it has affected just about every man woman and child in the country, everyone is losing out to the recession, with that in mind how can anyone really justify even one penny of bonus to staff of a mismanaged financial institution.

Comment number 74.

It is unbelievable to think that the Board of RBS is even considering bonuses. It is about time banks and bankers wake up. They will not loose their staff as other banks are not hiring. Bank share prices have fallen almost through the floor.

Due to the actions of the banks (and their staff), aided and abetted by government, we have global financial meltdown. My business turnover has halved. My costs have risen. I am struggling to survive and they want to bonuses!

If bonuses are paid then, perhaps, this will finally get people out on the streets protesting. This debate is just another example of the greed and stupidity of bankers.

Comment number 75.

I work for a small IT company and we made very good profit last year. The company decided the best interest was to pay off all the debts. So we didn't get a penny of bonus, just a very small gift instead but we are a debt free company now.

Should they still get a bonus even though they are hugely in debt?

Should they be rewarded regardless of what the result or condition is?

Comment number 76.

I could understand the logic of, "if RBS doesn't pay bonuses to the best staff they may go elsewhere" if they were the only bank which has made a loss. But, since all of the banks are in the mire, none of them should be paying bonuses. It is short termism and greed that got them into the mess they we are all in.

Bonuses are legitimately paid when a business is doing well nad certainly not when they are making massive losses.

Comment number 78.

I am however tempted to say that there could be another 10m hardworking people in the country not getting bonuses because the money is not there. Indeed more than 176k people have lost their jobs

Public funding should not be used soley for RBS bonuses.

The large bonuses in banks has in reality has little to do with performance but by using a stratergy that the c 176k hardworking staff will remain loyal in the hope that one day they may become one of the c500 to 1000 on mind-boggling sums.

Lets have a blog specific for advocating aggressive investigation and prosecution of wrongdoers and those who acted irresponsibly. You know this is the concencus of your bloggers

Comment number 80.

I work for a company that pays bonuses BUT ONLY IF THE COMPANY MADE A PROFIT!!! The fact that certain sectors may or may not have performed differently to the rest makes no difference to an absolute payment. At the end of the day bonuses come out of the "extra" money made (profit).

Let me put it this way : I challenge any employee of any of the banks to go onto the high street with a placard stating "We Deserve a Bonus" and see what happens!

I hear all about contracts etc etc but I guarantee that those contracts will have clause about linking bonuses to company performance.....so tough for all bank employees. Time for them to get real.

Comment number 81.

Comment number 82.

The simple reality is that without the intervention of the taxpayer RBS would have failed.

What part of the word failure do these gifted, hard-working and very important people don't understand?

I am sorry, Robert, I just don't get the argument. RBS is in trouble, it has stopped a lot of its lending, it is now part nationalised and yet the expectation is that the gravy-train has to continue?

In my time I have been in charge of successful parts of business which through the bad decisions of others, decisions with which I did not agree, got into trouble. Sure the bad businessmen paid with their jobs but I had to forego pay and privileges so we could turn the ship around.

This is called leadership, this is called commitment: this is the only moral solution to the dilemma you posit.

If you think that bankers are too immoral to show leadership, are not committed to their employer then pay the bonuses. The pig will walk anyway. Why waste any more money on such fragile egos?

Comment number 83.

Having met a number of key RBS employees as part of my work, I have found that RBS have been more willing to provide sensible finance to good, strong, well established, albeit struggling medium sized companies. These are the companies that are the bedrock of the economy and, in my experience, without RBS's support and massive professionalism may have failed, whist other banks were merrily walking away, which would have led to large job losses. Subsequently, these companies have gone from strength to strength and proved that sensible banking works.

I certainly hope the BBC does not have a policy of paying bonuses when the likes of Peston made an entire carrer out scare-mongering (merely a different type of spin that the BBC is so ready to attack) which has helped precisely no-one....thanks Robert!

Comment number 86.

Another absolutely sensible and well-reasoned blog from Mr. Peston (and the usual knee-jerk reactions from those who see everything only in black and white).

I want the taxpayers' investment in RBS to reap rewards one day, and it is thus imperative (as Robert says) that the Bank retain its most competent and experienced staff. I work at RBS - as a consultant, not a permanent member of staff, and thus not eligible for bonuses - and see first-hand every day just how committed and competent most of its employees are. Most of the staff do generate significant profits, even in the current climate, and it would be wrong to penalise those people for the sake of a few hundred idiots who brought the Bank (and the country) to its knees.

Comment number 89.

being in the not so envious steel industry-we have worked tirelessly for no bonuses for months.Why should we give our hard earned crumbs to these fat cats whose reckless lemming like lending has caused the financial woes in the first place ? The salaries and perks of these top bankers and investment"specialists" are like those of so called "top"footballers-they beggar belief and are in the long run,completely unsustainable.

Comment number 90.

.... and that seems to be, if you run a small provincial bank and come up with a business plan that is flawed.... as long as you can run it for long enough to make yourself into a big bank it’s OK because the Gov will step in and save you!

It seems somewhat immaterial to me that RBS is the “largest capital assets financial group in the world”, if the way they got there effectively lead to the death of the company

... and finally to the Banking staff – it is estimated over a million people may lose their jobs over the next year or so, people are having their houses repossessed, savers are being punished as a result of the Banks - it’s a hard life for many at the moment! Maybe think still having your jobs is the bonus!!! Because despite how well parts of RBS did, likelihood is you’d be out of a job if the tax payer had not bailed you out!

Comment number 92.

I hate to say it as a lifelong Royal Bank of Scotland customer, but I now think it would've been better to let RBS go to the wall. They're a shower, and have acted selfishly and disgracefully, not only putting their customers' monies at risk, but also the economy itself.

Fred the Shred Goodwin should be stripped of his knighthood and jailed. He was clearly incompetent and possibly even criminally negligent. That cannot go uncensured.

Now I have to consider who to transfer my accounts to and all the hassle that it will involve. It can't be HBoS because they're no better, so looks like it's going to have be the Clydesdale or someone else. Ho-hum ...

Comment number 94.

We (the masses who have been watching the financial meltdown from afar) have been in denial for a year. Its hitting home now to normal people and WE ARE NOT HAPPY with our leaders continued greed in face of adversity.

Summer of discontent is coming up, Obama can make bold steps because he was not part of the cause, Brown will keep tripping over his past and will do so on this issue also.

We will be out on the streets, the fat cats can get away with it in good times, they are too greedy not to want it to continue but those of us living on £15,000 - 30,000 a year thats the vast majority of the country will not stand for it in bad times.

Comment number 97.

a bonus...you must be joking, the banks are effectively bankrupt so the employees should be grateful just to still have a job. If they dont like it then they can resign and try their luck elsewhere ........If bonuses have to be paid due to contract, (though i think force majeure would apply) the key is to pay them in company stock, not redeemable for five years, this gives the management the incentive to stop taking short term decisions just to meet this years bonus.....which is one of the causes of today's problems.

Comment number 99.

A lot of people commenting seem to think that bonuses are only paid on profits. That's simply not the case in banking, or many other industries.

Bonuses are often paid simply on revenue. It's not profit-share, it's how you keep staff for the entire year despite abusive working conditions. What stops someone quitting after a 100-hour week is not love for the company or the job or a high basic salary, it's thinking "but if I stay until March I'll get a bonus".

"Let them go"? Well, sure, you can... but as Robert correctly points out, it's always the best and the brightest that have job mobility, and they *will* be the first out. Even paying slashed bonuses will result in some Brain Drain.

And with no bonuses and positive feedback? A fully nationalised bank, with a quarter of a million more de-facto civil servants, incompetent but in jobs for life. Woo hoo!

Comment number 100.

The argument in favour of a bonus for bank staff is like saying that an army that loses a battle disastrously should have all the individual soldiers awarded medals for fighting bravely. Defeat always brings recrimination - it was them, they failed, not me, after all, I was only following orders.

Well if it is a little recognition they need to boost morale, a nice shiny pound (or euro if they prefer) coin on a bit of ribbon can be given to all as a recognition of their heroic struggle against the overwhelming force their own banks' actions unleashed.

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